Posts Tagged ‘gross profit’

One of the surest ways to reduce your company’s inventory costs is to use a vendor managed inventory agreement. Success or failure with these agreements is dependent upon strong cohesion between your purchasing department and its vendor base. Delays are commonplace and manageable, but inaccurate information is much more costly and far more damaging. As such, many of today’s enterprises are upgrading their enterprise mobility network with rugged handheld computers, and they’re giving these computers to a purchasing department that must manage an ever-expanding vendor base.

Can an argument be made that your customers are the greatest assets your company has? In order to answer this question, think of what a customer means to your business. First, customers provide your company with profit. Second, they justify the purchase of inventory and investment in additional warehousing space. Third, they provide a means to grow market share and further increase revenue. Fourth, they are the reason your company finances its future expansion. Fifth, they are the impetus you need to improve your product and service offering. This list could go on and on. The point is that everything begins and ends with your customers. Consider this a constant feedback loop. Happy customers buy more, which in turn increases your revenue, and allows you to grow your business. This is the reason your customers are your greatest asset and it is ultimately why your sales, marketing, customer service, and field service technicians, must have rugged mobile devices. It is these devices that allow them to better manage these customer assets.

Do low inventory counts always equate to low costs? After all, inventory is more expensive the longer it’s held and maintaining low inventory levels does help to reduce the high costs of inventory damage and obsolescence. In addition, low inventory also means the company’s is reducing its daily cost of money. However, while a company’s costs to finance inventory can be a concern, a number of companies are surprised to see just how much their inventory costs them when their inventory counts are too low. In fact, an argument can easily be made that a company’s cost to maintain low inventory is just as high, if not higher, than having too much inventory. So how is this possible? More importantly, what are the main cost drivers of a company who maintains too low an inventory count? Continue reading “Inventory Counts, What are the Costs if They Get Low?” »

Most companies understand that inventory costs money, but few understand why inventory becomes more expensive the longer it’s held. Still, even fewer companies take the time to track the impact of the cost of money on their inventory. When thinking of the cost of money, think of your company’s costs to purchase and retain parts and raw materials for long periods. Think of your company’s financing costs, how those costs rise over time and ultimately, what drives those costs. More importantly, think of how long it takes to sell that inventory and how certain customers can increase these costs by taking too long to pay Continue reading “Understanding Your Company’s Financing Costs of Inventory” »